Email of the day on energy prices
Comment of the Day

July 28 2022

Commentary by Eoin Treacy

Email of the day on energy prices

Fyi, have finally bit the bullet and fixed energy price with EDF for 2 years until July 2024.

The Nord Stream pipeline 1 issue over the last few days made me make the final decision.

Would welcome Mr Treacy comment about the recent events with Russia cutting supplies and short and medium-term implications. Will we ever see the energy prices normalize? His comments are always very insightful.

Eoin Treacy's view

Thank you for sharing your experience and this question which may be of interest to the Collective. Russia has a clear interest in Europeans being uncomfortable this winter. Wars are expensive. Quick victories are always desirable. That’s not always how things work out but eventually every war ends with some form of negotiation or withdrawal.

For Russia, the clear aim is to gain as much territory as possible, and to have sanctions removed. Europe will be a lot more amenable to negotiations if energy rationing spreads to the household sector. Therefore, Russia will do whatever is necessary to make that happen.

To date they have captured most of the Donbas region which houses much of the industrial heartland as well as Ukraine’s largest gas field. While they may wish to capture the whole country, they may be willing to settle for what they have, at least for now.

Energy prices are always about supply and demand. Oil prices surged following the invasion because Russia is a major supplier and consumers are a lot pickier today about where their oil comes from. There is no mystery where additional barrels can be found. Not only are Libya, Venezuela and Nigeria disappointing with production but offshore drilling has all but disappeared. At least in the USA, the spending deal currently being discussed includes significant streamlining of drilling permitting. That’s good news if it becomes reality.

Supply and demand will eventually normalize. Hopefully, that will be because supply increases. Demand correcting is a much less welcome outcome for consumers. Oil prices continue to pause above $100 and a sustained move below that level would be required to question demand dominance.

Netherland natural gas remains at elevated levels.

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